High Risk Low Diversification Portfolio with Heavy Technology Focus and Strong Historical Growth

Report created on Dec 2, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of just two positions, with a significant allocation to the Vanguard S&P 500 ETF at 54.14% and NVIDIA Corporation at 45.86%. This creates a low diversification profile, with a heavy reliance on the performance of these two entities. While the S&P 500 ETF offers some level of diversification across various sectors, the large allocation to NVIDIA introduces significant concentration risk. Balancing the portfolio with additional assets could help reduce this risk and provide more stability.

Growth Info

Historically, the portfolio has delivered an impressive compound annual growth rate (CAGR) of 38.82%. However, this growth comes with high volatility, as evidenced by a maximum drawdown of -64.38%. This indicates that while the portfolio has the potential for high returns, it is also susceptible to significant losses. Understanding this trade-off is crucial for managing expectations and ensuring alignment with investment goals. Diversifying the portfolio could help mitigate such drastic fluctuations in the future.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This simulation provides a range of possible outcomes, assuming a hypothetical initial investment. The results show a wide spread, with a 5th percentile return of 1,581.18% and a 67th percentile of 26,069.31%. The median return stands at 14,793.07%, suggesting a high potential for growth. However, the variability in outcomes highlights the importance of diversification to manage risk and improve the likelihood of achieving desired results.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily skewed towards stocks, with 99.96% allocated to equities and a mere 0.04% in cash. This asset class distribution reflects an aggressive risk profile, prioritizing growth over stability. While this approach has the potential for high returns, it also exposes the portfolio to significant market volatility. Introducing other asset classes, such as bonds or real estate, could help balance the risk-reward ratio and provide a cushion during market downturns.

Sectors Info

  • Technology
    64%
  • Financials
    7%
  • Health Care
    6%
  • Consumer Discretionary
    6%
  • Telecommunications
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

The sector allocation reveals a substantial concentration in technology, which makes up 63.74% of the portfolio. This heavy reliance on a single sector can increase vulnerability to sector-specific downturns. Other sectors, like financial services and healthcare, have minimal representation. Diversifying across a broader range of sectors would reduce dependency on the technology sector and potentially enhance overall portfolio resilience.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.67% of assets allocated to this region. This lack of international exposure limits the portfolio's ability to benefit from global growth opportunities and diversifies away from regional risks. Including assets from other regions, such as Europe or Asia, could provide a more balanced geographic distribution and potentially enhance returns while reducing risk.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

Click on the colored dots to explore allocations.

The portfolio optimization chart suggests opportunities for improvement. Moving along the efficient frontier can help achieve a more balanced risk-reward profile. To pursue a riskier approach, consider increasing allocation to high-growth assets while maintaining diversification. Conversely, for a more conservative strategy, incorporating bonds or other low-volatility assets could provide stability. Focusing on diversification and risk management will enhance the portfolio's overall performance potential.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.65%

The portfolio's dividend yield is relatively modest at 0.65%, with the Vanguard S&P 500 ETF contributing a yield of 1.2%. While dividends provide a steady income stream, the current yield is low, reflecting the portfolio's focus on growth-oriented assets. Investors seeking higher income may consider adding dividend-paying stocks or funds to increase the yield. However, this should be balanced with growth objectives and risk tolerance.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from low costs, with the Vanguard S&P 500 ETF carrying a Total Expense Ratio (TER) of just 0.03%. Keeping investment costs low is critical to maximizing net returns over time. This cost efficiency is a positive aspect of the portfolio. Continuing to prioritize low-cost investment options will help maintain this advantage and ensure more of the portfolio's returns are retained.

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